Additional data obtained from an examination of the accounts in a ledger for 20Y3 are as follows: a. the investments were sold for $210,000 cash b. equipment and land were acquired for cash c. there were no disposals of equipment during the year d. the common stock was issued for cash e. there was a $600,000 credit to Retained Earnings for net income f. there was $108,000 debit to Retained Earnings for cash dividends declaimed instructions: prepare a statement of cash flows, using the indirect method of presenting cash flows from( used for) operating acti
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Additional data obtained from an examination of the accounts in a ledger for 20Y3 are as follows:
a. the investments were sold for $210,000 cash
b. equipment and land were acquired for cash
c. there were no disposals of equipment during the year
d. the common stock was issued for cash
e. there was a $600,000 credit to
f. there was $108,000 debit to Retained Earnings for cash dividends declaimed
instructions:
prepare a statement of
Cash Flow Statement -
The Cash Flow Statement is the statement that shows the cash inflow and outflow of the company. This is a very important financial statement that shows the actual cash position of the company.
On the basis of cash flow from operating activities company decides whether to purchase fixed assets or repay debt, pay dividends if they have positive cash flow from operating activity.
Or else they can sell the assets or borrow funds by way of notes to increase the negative or low cash flow available in the business.
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